Updated on April 4, 2022
The term “intra-community supply and acquisition” (ICSA) refers to the movement of goods between EU Member States (MS) (EU). In order to calculate VAT, there were two transactions:
within a specific community (ICA)
local sources of supplies (ICS).
This section focuses on the VAT treatment of ICS goods. An ICS is a term used to describe the transfer of goods from one EU Member State to another. The buyer is responsible for calculating and submitting VAT in some transactions. The buyer is in charge of paying the VAT, not the seller.
What is the purpose of this section?
when products imported into the EU are subject to EU VAT (EU)
Keep in mind the following evidence when creating an ICS:
The EU’s product supply is referred to as “triangulating.”
Delivery of new modes of transportation to a person in another EU Member State is subject to VAT.
VAT obligations arise when excisable items are sent to another EU Member State.
Zero rate of VAT on ICS of goods
The things must first be made available locally before they may be transported (ICS).
A zero percent VAT rate is possible if the following requirements are met:
If the customer is VAT registered in another EU member state, you must get and record their VAT registration number (including country prefix)
The items must be shipped or transported to another EU member state, and the provider must submit complete VIES returns in accordance with legal requirements.
If any of the following five conditions are not met, the consumer must be charged the appropriate rate of Irish VAT.
If the VIES return requirement is not met, the Zero rate does not apply to the supply of goods.
There is a chance that Revenue does not think that the products were sold and delivered to a VAT registered individual in another Member State of the European Union. In some cases, the provider is responsible for charging Irish VAT.
Should zero-rating conditions turn out to be true, however:
The customer may be able to get the VAT they paid to the supplier back in order to make a change to their VAT return for that time period.
What is triangulation?
Triangulation is the exchange of two shipments of goods between three VAT-registered dealers in three different EU Member States. As an illustration, consider the case of commerce between two Member States (MS1 and MS2) (MS2). However, the goods are sent to a third-party trader in another country (MS3).
Triangular transactions have necessitated the implementation of a simplified solution to ease the administrative and compliance burdens on traders and tax authorities. Simplification measures can only be enacted if the VAT registration of all three traders is in the European Union.
The following is a broad description of how simplicity measures work:
A zero-rated intra-Community supply exists between enterprises A and B. (ICS).
The supply is documented in a VAT information exchange system (VIES) return in the form of an invoice from company A to company B.
An EU acquisition has been made using firm B’s VAT number (ICA). When Company B files its VAT return, it includes the ICA as an expense.
Through a third-party vendor, Firm B provides VAT-free services to Firm C. Company C records this transaction as a received supply for the purposes of calculating VAT. Thus, in Member State 3, it is presumed that company C has accounted for company B’s VAT responsibility through its operations there.
Firm C subtracts the refund from its VAT return when it is entitled to one.
A transaction where more than three parties are engaged.
The simplification measure can only be used in a standard triangulation scenario. Whenever more than three corporations are involved, strict legal procedures must be adhered to (for example, successive sales between businesses in Member State 2). Registration in at least one other EU Member State may be required depending on the individual circumstances.
Evidence required for ICS of goods
Documentation is needed to establish that products have been shipped out of the state and removed.
Presumption that items have already been moved
It is safe to assume that the items have been sent and delivered if the vendor is in possession of particular documentation.
Additional guidance provides more details on the materials that must be submitted.
These documents are not required for the Zero rate to apply if the supplier does not have them in their possession. If evidence of dispatch and transportation can be shown, the Zero rate can still be used. Whoever arranges the transportation will have to provide evidence. To demonstrate that the transportation took place under certain conditions, the following sections provide examples of evidence that could be utilised in that regard.
Proving goods have been transported without engagement of presumption of transport
No, the zero-rate does not inherently suggest the supplier does not have the documentation required to invoke the presumption of transit. In some cases, the zero rate can still be applied provided there is sufficient evidence of dispatch and transportation. Whoever arranges the transportation will have to provide evidence. The following sections detail the many possibilities.
The provider is in charge of coordinating transportation.
Documentation of the supply and delivery of goods to a customer should be kept by that company if it arranged the transportation.
The following are some instances of this:
a bill of lading or other evidence of the transfer of funds from foreign banks for payment of the supplier’s invoice.
The customer arranges their own transportation.
The business customer has the option of either arranging transportation for the products or transporting the goods themselves. To ensure that the items have been delivered to another EU member state, the supplier must verify that they have been carried or shipped there.
It is the supplier’s responsibility to collect and store any supporting documentation received from the customer. This paperwork serves as proof that the items were received in the other Member State. Documentary evidence in such circumstances may include:
These documents include receipts from the warehouse and delivery dockets.
It’s also a good idea to keep track of the customer’s transportation method, including:
a vehicle registration number, flight number, and ship’s sailing details.
Issues for suppliers to be aware of
Suppliers are urged to exercise caution. In order to be eligible for zero-rating, suppliers must meet all five of the standards for zero-rating. There may be room for doubt in the following situations:
the provider has never met the customer before the customer arranges for the items to be collected and transported by the customer.
without prior notification or correspondence, the customer pays the supplier in cash when the customer’s transportation arrives at the supplier’s premises.
Considering the alleged final destination of the items, the type or amount of commodities acquired is out of step with commercial practise.
When one or more of these conditions are present, the supplier must continue with extreme caution.
If there is any question, the supplier should impose Irish Value-Added Tax (VAT). Customer can claim VAT paid to supplier back if zero-rating conditions are later created. Customer: The supplier can then alter their VAT return for the relevant period.
If the customer’s VAT registration number isn’t valid, the supplier may be sceptical. In such circumstances, the supplier should use the VAT number validation mechanism to verify the customer’s VAT registration number. Before applying the zero-rating, make sure the customer’s VAT registration number is correct.
In order to be eligible for a zero-rating, suppliers should take all reasonable steps to ensure that all of the requirements are met. If a problem arises with a particular shipment after a supplier has completed these steps, the supplier will not be penalised. However, if a supplier fails to take all reasonable precautions, the Irish tax rate will be recovered from them. Check out our guide on keeping yourself and your company safe from being a victim of VAT fraud.
Fraudulent claims are punishable by fines.
False claims for zero-rating are punishable by law.
Here is a breakdown of the punishments:
All goods that have not been exported or carried out of the state can be seized and forfeited.
A €4,000 fine will be imposed for any transaction in which an invalid VAT number is used. This penalty is in addition to the tax that would otherwise be owed.
Arrest may be made of you.
Legal penalties up to €126,970 as well as up to five years in prison are available.
Supplies of excisable goods to other Member States
VAT registration is a requirement for any provider selling excisable goods into another EU member state. All excisable items are liable to VAT in the Member State where they are purchased.
What do you mean when you talk about excisable goods?
The following items are subject to excise taxes:
Wine, beer, cider, and spirits are all examples of alcoholic beverages.
As an illustration of a tobacco product, consider cigarettes.
Roll-your-own cigarillos and pipe tobacco.
Oils derived from mineral sources (motor and heating fuels).
The VAT treatment of excisable products will be further clarified in future guidelines.
ICS of a new means of transport
Intra-community supplies include the provision of a new mode of transportation to anyone in another Member State (ICS). A motor vehicle, watercraft, or aircraft is a new mode of transportation. The purchaser of the new mode of transportation is required to pay VAT in the Member State where the vehicle will be used.
A private individual in another Member State may purchase new transportation equipment. In certain cases, the Member State of arrival is ultimately responsible for paying VAT.
However, the dealer must charge VAT if the buyer picks up the new vehicle in such state. VAT should be refunded if a buyer proves that VAT has been paid in their Member State to a dealer. The dealer can then make the necessary adjustments to their VAT liability in their VAT return for the relevant period of time.
Documentary proof, such as the following, should be retained by the dealer:
the VAT payment document and verification of the new vehicle’s registration in the other Member State.
For VAT reasons, the following table outlines what is considered to be a new mode of transportation:
Vehicles that can be used to calculate VAT
Transport Specification ‘New’
A motorcycle with more than 48cc or more than 7.2kw of power
6 months of age or fewer than 6,000 kilometres of trip
a ship or boat in the sea
The boat must be at least 7.5 metres in length and have been sailing for less than 100 hours.
Three months old or less, or less than 40 hours in the air